17. Which of the following costs is a fixed cost? A) cost of dairy ingredients u
ID: 2341078 • Letter: 1
Question
17. Which of the following costs is a fixed cost?
A) cost of dairy ingredients used to produce ice cream
B) fuel used by delivery trucks
C) labor wages of workers who mix dairy ingredients to make ice cream
D) depreciation expense on factory building
18. In a small construction firm, a crew supervisor is added for every ten workers employed. The salaries of the crew supervisors are a ________.
A) variable cost
B) step cost
C) mixed cost
D) step cost
19. Olive Oil Company, a producer of olive oil, has the following information:
Income tax rate 30%
Selling price per unit $10.00
Variable cost per unit $4.00
Total fixed costs $120,000.00
The contribution margin per unit is ________.
A) $4.00
B) $6.00
C) $8.00
D) $10.00
20. Smithsonian Company sells chairs at $60 per chair. The variable costs are $30 per chair. Total fixed costs for the period are $150,000. The contribution margin ratio is ________.
A) 22.5%
B) 37.5%
C) 50.0%
D) 62.5%
21. Suppose a hotel has annual fixed costs applicable to its rooms of $2.5 million for its 250-room hotel. Average daily room rents are $65 per room and average variable costs are $15 for each room rented. It operates 365 days per year. If the hotel is completely full throughout the year, what is net income for one year?
A) $1,275,000
B) $1,780,500
C) $2,062,500
D) $2,225,750
22. Green Company has total variable costs of 75% of total revenues and fixed costs of $10 million per year. What is the break-even point expressed in total revenue dollars?
A) $10 million
B) $12.5 million
C) $40 million
D) $100 million
Explanation / Answer
17.
D) depreciation expense on factory building
Depreciation will be there every year.
18.
B) step cost
With every 10 employees added, a new supervisor will be added and Salaries will increase.
19.
B) $6.00
Sales - Variable cost
20.
C) 50.0%
=(Sales - Variable Expenses)/sales
21.
C) $2,062,500
= (65-15)*365*250 - 2500000
= 2062500
22.
C) $40 million
Fixed cost = 25% of Revenues
Therefore, Total Revenue = $40 Million
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